World markets plunge as US rating reduced
World markets plunged after a key ratings agency shocked traders with a downgrade to its outlook for US government debt.
Standard & Poor's cut its outlook for sovereign debt in America to negative from stable due to risks from the country's growing deficit.
S&P warned that while the US has a high-income, diversified and flexible economy, the country's ballooning deficit could offset these positives over the next two years.
The move, a serious blow to President Barack Obama's administration, sparked declines on London's FTSE 100 Index, which dropped more than 2pc, as well as Wall Street's Dow Jones Industrial Average, which fell nearly 2pc.
S&P is one of three main credit rating agencies which offer an informed opinion on the credit-worthiness of a company or government. Moody's and Fitch are its main competitors.